Two tax measures are on California’s November ballot, setting up a clash between expanding the state’s taxing power and constraining it. The first, known as the Billionaire Tax Act, would impose a one-off 5 percent levy on the net worth of the state’s wealthiest residents. The other, the Retirement and Personal Savings Protection Act, would constitutionally circumscribe what Sacramento can tax, barring new taxes on retirement accounts, personal savings, and assets held by individuals, and forbidding retroactive taxation.
Anyone with even modest savings should grasp what these measures imply, not just the billionaires at the top who would be directly affected by the wealth tax.
Let’s begin with the Billionaire Tax Act. There is a noticeable gap between its promises and what it would actually deliver. Joshua Rauh of Stanford University, along with collaborators from the Hoover Institution, have run the numbers, and their findings raise serious doubts about any meaningful increase in revenue.
Supporters contend that the tax would yield about $100 billion. Rauh’s team, however, notes that some billionaires have already begun relocating their wealth and residences: Larry Ellison left California in 2020, and six others, including Google cofounders Larry Page and Sergey Brin, exited between the measure’s announcement and December 31, 2025—the date immediately before the liability would take effect.
These departures alone would erode the projected revenue by nearly 40 percent before any funds are collected. When additional departures are considered using migration patterns documented in academic research, the expected revenue could shrink to roughly $40 billion.
Next, consider the loss of tax revenue from the people who leave the state. By narrowing the tax base, the measure’s “net present value” would amount to at least a $25 billion loss for California.
Then there is the retroactivity complication. The proposal would tax billionaires based on where they resided and on actions that date back to January 1, well prior to any vote. Individuals who believe they established residency elsewhere in a lawful manner could end up fighting California in court for years, at the expense of other taxpayers, based on details as arbitrary as where they kept their pets or which clubs they belonged to.
The claim that this is a one-time tax deserves equal skepticism. Rauh points out that the measure includes a constitutional mechanism to lift California’s cap on taxation of intangible personal property. Once that legal framework exists, future wealth taxes could be imposed at any rate, at any threshold, at any time. In short, it would be a permanent expansion of state power.
The Billionaire Tax Act is so capricious and its potential precedent so troubling that it practically invites voters to scrutinize the second ballot measure. The protection of Americans’ savings from such confiscation should rest on three clear principles.
First, fairness: when a worker saves after taxes to invest for retirement, the resulting balance is not a new source of revenue. Treating that savings as a fresh tax base would amount to taxing the same dollar twice.
Second, stability: a tax system that targets asset values rather than income streams is inherently volatile. A founder whose stock value plunges 40 percent during a downturn would still owe wealth tax based on last year’s higher valuation. The same absurdity would confront an ordinary saver whose 401(k) is taxed.
Third, and most urgent, is California’s own track record. The state’s nonpartisan Legislative Analyst’s Office has warned that spending is set to rise by nearly 70 percent between 2019 and the upcoming fiscal year, far outpacing the corresponding rise in revenue over the same period. The result is a projected deficit of more than $50 billion over the next two years, a shortfall born entirely of Sacramento’s decisions and not tied to federal policy. Trusting policymakers with that spending history to refrain from taxing billionaires is reckless and naive.
If the wealth tax fails to deliver, the state will look for the next accessible pool of assets. Nonbillionaires who remain after California’s billionaires depart could become the targets, and their retirement savings might become the new tax base. Rauh wrote earlier this month while continuing his analysis of the proposals that, while roughly 0.001 percent of California households are billionaires, about 62 percent have retirement accounts.
If the prospect of this being plausible is challenged by federal protections—or if one believes billionaires will always be treated differently than ordinary savers who accumulate retirement accounts over a lifetime—consider California’s current treatment of health savings accounts (HSAs).
Under federal law, HSA contributions and earnings are tax-exempt. Yet California’s tax scheme taxes the interest, dividends, and capital gains from HSAs as ordinary income, affecting roughly 4.5 million residents who are not billionaires or millionaires. Politicians have simply decided that this revenue is rightfully the state’s to claim. Applying the same logic to 401(k)s and IRAs would not require new principles—only the same political will.
In short, a wealth tax on billionaires would be only the first step, threatening the retirement savings of ordinary Californians. The HSA precedent demonstrates that the threat is real. The Retirement and Personal Savings Protection Act would establish constitutional barriers to this sort of expansion.
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